Here, EBIT is earnings before interest and taxes; FCFt is the free cash flow generated in year t before any payments are made to any investors, so it must be used to compensate common stockholders, preferred stockholders, and bondholders; WACC is weighted average cost of all the firm's capital, such as debt, preferred stock, and common equity. Free cash flows are forecasted for 5 to 10 years, after which it is assumed that the company reaches its horizon date. That is, the final explicitly forecasted FCF will grow at some long-run constant rate. You can use the following formula to calculate the market value of the company's operations as of that date: = Horizon value of company = V Company's operations at t=N = PV of expected future free cash flows FCFN+1 WACC-8FCF Market value of company = Market value of company's operations + Market value of company's nonoperating assets FCF1 FCF2 + ... + + Market value of company's nonoperating ( (1+WACC) (1+WACC)2 (1+WACC) FCF = + Suppose your company's WACC = 12% and you know that the free cash flow of your company next year is going to be FCF1 = -$1.2 and then FCF is expected to grow at 8%. Then the FCF2 is and the company's horizon value in one year is This means that the firm's value today is